June 29 (Reuters) - Constellation Brands Inc will
buy the remaining half of its Crown Imports joint venture in a
$1.85 billion de al that gives it f ull control of distributing
the popular Corona Extra be er in the United States and could
lead it to buy more brewers.

Constellation shares jumped 25.8 percent to their highest
level i n more than five years, as the deal to buy out Grupo
Modelo gives Constellation control of the
best-selling imported beer in the lucrative U.S. market.

The deal is a "game changer" for Constellation, already the
world's largest branded wine company, according to UBS analyst
Kaumil Gajrawala.

"It removes an important overhang on the stock, diversifies
their revenue base, doubles their equity income from Crown and
gives the company a more significant foothold in the U.S. beer
market," Gajrawala said.

Constellation said on Friday it was buying the half of the
joint venture it doesn't own from its partner, Mexican brewer
Modelo, wh ich is being acquired by Anheuser-Busch InBev
.

Analysts said anti-trust concerns likely prompted the sale
of the stake, as AB InBev already controls some 49 percent of
the U.S. beer market with brands like Bud Light.

Constellation also reported slightly better-than-expected
quarterly profit on Friday and stood by its full-year earnings
outlook.

The maker of Robert Mondavi and Ravenswood wines also said
it plans to buy the Mark West pinot noir wine brand for $160
million.

Constellation said it had fully committed bridge financing
in place to complete the p urchase of Crown and expects the deal
to boost its earnings and cash flow.

AB InBev will have the right, but not the obligation, to
exercise a call option for 100 percent of Crown every 10 years
at a multiple of 13 times Crown's operating earnings,
gua ranteeing Constellation a minimum payment for the business.

OVERHANG GONE

The earlier joint venture agreement was in place until 2016,
and its renewal was uncertain. Now that Constellation will have
the business moving forward, the company, and investors, can put
more value on it, Constellation Chief Executive Rob Sands said.

"With that uncertainty gone and having a perpetual contract,
clearly that makes it a business we're going to be much more
inclined to invest behind," Sands told Reuters in an interview.

Crown will have complete control of the brands, including
distribution, marketing, promotion and pricing. AB InBev, which
is paying $20 billion for the half of Modelo it doesn't own,
will be responsible for insuring the supply and quality of the
beers and for introducing new products.

In addition to more control over the Modelo brands, which
include Pacifico and Victoria, the deal gives Constellation more
flexibility to buy or develop other beer brands though Sands
said the company will be focused on its current deal for right
now.

EARNINGS POTENTIAL

Stifel Nicolaus analyst Mark Swartzberg upgraded his stock
rating on Constellation shares to "buy" on the news, saying the
beers' large market position and growth trajectory should give
Constellation a higher trading multiple.

Excluding one-time items, Constellation earned 40 cents per
share in i ts just-ended fiscal first quarter. On that basis,
analysts on average were expecting 39 cents, according to
Thomson Reuters I/B/E/S.

Net sales slipped to $634.8 million from $635.3 million.

Crown Imports contributed $215 million in equity earnings to
the company in fiscal 2012, Constellation said in a statement.
In an interview, CEO Sands said owning the whole business will
improve his company's earnings potential moving forward.

The deal is expected to close during the first quarter of
2013, which is the last quarter of Constellation's fiscal year.
That is why Constellation did not update its earnings outlook,
but said it still expects 2013 earnings of $1.93 to $2.03 per
share, excluding one-time items.

The company also suspended its current share-buyback program
as it pays down debt from the deal.

Constellation shares were up $5.06, or 23.3 percent, at
$26.82 in afternoon trade on the New York Stock Exchange.
Ea rlier, the stock hit $27.39, its highest in more than five
years.